Taxpayers face a loss of £85,000 on a Help To Buy loan at New Capital Quay after Homes England accepted that a flat blighted by Grenfell cladding was now worth only £50,000.
Cecile Langevin, 32, a mother of two, bought her £475,000 flat with a £95,000 Help To Buy loan, savings and a mortgage in 2014.
But it has been valued for sale at only £50,000 owing to the Grenfell cladding, which has blighted just under 1,000 flats at New Capital Quay.
This valuation has been accepted by Homes England, which means Mrs Langevin will pay back only £10,000 of her loan.
The decision opens up the prospect of taxpayers losing millions over homes bought with Help To Buy blighted by either cladding or doubling ground rents.
“Homes England has now determined that you may proceed with the redemption of your help-to-buy equity loan based on the valuation provided … ie at a market value of £50,000,” it said in a letter to Mrs Langevin, reported today in the Guardian.
A charity that is campaigning for leasehold reform in the UK to liberate home owners from onerous contracts with freeholders said it was time the government took action forcing the removal of such cladding.
Martin Boyd, a trustee at Leasehold Knowledge Partnership, is quoted in the newspaper:
“The leaseholders in cladding flats have faced a huge amount of stress and worry over the last 10 months and have now seen their homes massively devalued.
“If the government is also going to suffer by having to write down these help-to-buy loans, it might finally encourage the sector to help develop a more workable solution. It’s not just the private and shared owners impacted by this problem.”
He said social housing landlords would also be experiencing significant devaluation on their properties, which could put them in breach of their loan covenants.
At New Capital Quay builder and freeholder Galliard Homes and warranty provider NHBC are fighting it out over who picks up the £20-40 million cladding removal bill, with leaseholders caught in the middle.
Both are hoping that government will be forced to act, after changing its mind over the safety of the cladding following the Grenfell disaster.
Help-to-buy agency writes down loan on flat over Grenfell-style cladding
The government has agreed to virtually wipe out a help-to-buy loan on an apartment in a London block with cladding similar to that used at Grenfell Tower, it has emerged. It will make the write-down on the grounds that the value of the flat in Greenwich has been reduced from £500,000 to £50,000 because the developer has no current plans to remove the cladding.
Related posts:
Could paying off Help To Buy loans on blighted homes force government to act over Grenfell cladding … and doubling ground rents?
Leaseholders face £19m to £40m Grenfell cladding bills at Galliard Homes’ New Capital Quay
NHBC accepts Grenfell cladding bill at Galliard’s New Capital Quay
New Capital Quay cladding may cost £7-10m, while NHBC sends in experts – and libel warning to BBC
England’s cladding leaseholders could end up with equity stripped out of their homes, warns Welsh minister
Will Law Commission bring in the ‘seismic changes’ that leasehold needs?
Sounds like everyone with Doubling ground rents and Grenfell cladding can get most of their Help to Buy loan paid of early at a big discount. This could cost the Government many millions but still Javid does nothing.
How about another call to evidence review of call to evidence. Does anyone know how many calls to evidence and reviews have been rolled out by the DCLG.
Government Ministers make really poor business men when dealing with tricky situations. Even US President Donald Trump would find ways to threaten them first and make demands to put them into liquidation.
The Buildings are legally owned by the ground rent investment companies and they should be held responsible for paying to replace the combustible insulation on the blocks of flats. .
The Housing Minister should register a legal charge on the freehold company and its controlling controlling at Land Registry and disqualify all of the UK directors and appoint a managing agent to collect ground rent income and pay 100 % of the ground rent income to the Treasury until further notice..
The Chancellor to raise the tax on ground rent income received by investment companies to 100% until the problem as been solved across the entire country. .
Sounds like a plan
Apologies : Third sentence, second line should read :-
controlling company at Companies House and disqualify …….
Ollie, You are quite correct. The building does belong to the ground rent investment companies (the freeholders) They are responsible for paying to rectify the defective cladding.
The issue revolves around as to whether those costs can subsequently be defraid to to the building service charge accounts?
Irrespective of innocent leaseholders having to pay, the cladding replacement must be carried out as a matter of the greatest urgency.
The Government must find the means to force ground rent investors to bring their buildings up to a safe standard as an absolute priority and then the legal arguments as to who ultimately pays can begin If the freeholders.refuse or simply do not have the funds to make buildings safe, those assets should be forfeited.
Good for her. That was the agreement. So why can’t she hold them to it. I’m pleased to hear someone can benefit other than housebuilders.
Obviously bad for every uk taxpayer in the short term, so hopefully the government will move fast.
*move fast and hold someone other than the leaseholder or tenant but only a tenant when it suits the landlord accountable.
Sajid Javid is the Minister who has to decide the current legal owner of building owner is responsible for paying the cost of removing the combustible insulation by non-combustible material and act quickly by “declaring ground rent is not payable in the affected blocks” until the remedial work is completed .
Sajid Javid and /or the Chancellor should back him up and direct all UK banks making loans to finance ground rent freeholders to withdraw from lending and direct the HMRC to terminate “loan interest” as an expenses against ground rent. Also order the Land Registry to any block transfers of the freehold title until consent is given by the Housing Minister.
Sajid Javid and /or the Chancellor should back him up to allow leaseholders of existing property to extend their lease to 999 years lease at peppercorn ground rent by payment of 10 x first year ground rent. The freehold company may reclaim the original sum paid for first purchase of the freehold title as compensation or loss of ground rent income from the Developer.